In addition to revising its inflation estimates, the Bank of Japan hiked interest rates on Friday to their highest levels since the global financial crisis of 2008, demonstrating its confidence that growing wages will maintain inflation within its target range of 2%.
Days after US President Donald Trump took office, the decision is the first rate hike since July of last year and is expected to keep international policymakers on guard against the possible fallout from threatened higher tariffs.
As anticipated, the Bank of Japan increased interest rates and its inflation projections on Friday, strengthening the yen and sending Japanese government bond yields to new multi-year highs and bolstering expectations that it would raise rates again.
At a press conference, BOJ Governor Kazuo Ueda stated that while pay increases were becoming more widespread and integrated across businesses, the weakening yen still drove up import prices. Regarding when the next rate hike will occur, he stated, “We have no preset idea.” The BOJ will decide at each meeting by examining the data that is available at the moment.
The BOJ increased its short-term policy rate from 0.25 percent to 0.5 percent during its two-day meeting that ended on Friday. This is the highest level Japan has seen in 17 years. Toyoaki Nakamura, a board member, dissented from the vote, which went 8-1.
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